A person who has lump sum amount that he is ready to invest in a good plan so that he can get good returns after retirement which will be helpful for meeting their daily needs should consider a Single Premium Annuity scheme. Under such scheme, the investor just has to invest the lump sum amount in the scheme. Against this investment, the investor will receive regular income after retirement at regular intervals. The amount of return and the interval period are all mentioned in the annuity contract that is created and signed at the time of investment. The annuity scheme will work in the same mechanism and as per the terms and conditions mentioned in the contract. There are two types of single premium annuity plans in the market. First such plan is called a Single Premium Immediate Annuity plan and the second such plan is called the Single premium Deferred Annuity Plan.
There is only one difference between the two Single Premium Annuity Plans. In a single premium immediate annuity scheme, the investor starts receiving the income immediately after he makes the investments and a part of the fixed return received is the income which is taxable in the hand of the investor immediately. On the other hand, in a single premium deferred annuity scheme, the investor receives the regular return only from a future date which is negotiated and decided upon at the time of investment. Further, the part of the fixed returns which is taxable gets taxable only on the future date when the return is received. An investor chooses a single premium immediate plan if he is near to his retirement age whereas he chooses a single premium deferred plan if there is time to reach his retirement age. This is so because an annuity plan is structured mainly to benefit people in their old age when they are in need of money and there is no other source of income. In such a situation it is the regular funds received by the investor from the annuity scheme that helps them to meet their daily needs.
Further to the above two single premium annuity plans, one should know that further these schemes are of 2 types. One is the fixed scheme and the other is the variable scheme. In a fixed scheme, the underline securities are fixed return generating securities and provide fixed returns to the investors. On the other hand, the underline securities for variable scheme are those which generate volatile income such as equity, indexed equity, bonds etc. In this scheme, the investor receives volatile income which may be very high as well as in some case he may receive losses. Further, the type of plan or scheme the investor will invest in will also depend on his risk capacity. The investor should also make sure that these Single Premium Annuity plans forms a part of his investment strategy and does not become his only savings or investments.